Amgen 2011 Annual Report Download - page 164

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AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
swap contracts have been designated as cash flow hedges, and accordingly, the effective portion of the unrealized
gains and losses on these contracts are reported in AOCI and reclassified to earnings in the same periods during
which the hedged debt affects earnings.
In connection with the anticipated issuance of long-term fixed-rate debt, we occasionally enter into forward
interest rate contracts in order to hedge the variability in cash flows due to changes in the applicable Treasury
rate between the time we enter into these contracts and the time the related debt is issued. Gains and losses on
such contracts, which are designated as cash flow hedges, are reported in AOCI and amortized into earnings over
the lives of the associated debt issuances.
The effective portion of the unrealized gain/(loss) recognized in OCI for our derivative instruments
designated as cash flow hedges was as follows (in millions):
Years ended December 31,
Derivatives in cash flow hedging relationships 2011 2010 2009
Foreign currency contracts ................................................. $(25) $191 $(202)
Cross currency swap contracts .............................................. (26) — —
Forward interest rate contracts .............................................. — (5) (11)
Total .............................................................. $(51) $186 $(213)
The location in the Consolidated Statements of Income and the effective portion of the gain/(loss)
reclassified from AOCI into earnings for our derivative instruments designated as cash flow hedges was as
follows (in millions):
Years ended December 31,
Derivatives in cash flow hedging relationships Statements of Income location 2011 2010 2009
Foreign currency contracts ................... Product sales $(108) $47 $ (7)
Cross currency swap contracts ................ Interest and other income, net (3) — —
Forward interest rate contracts ................ Interest expense, net (1) (1) (1)
Total ................................ $(112) $46 $ (8)
No portions of our cash flow hedge contracts are excluded from the assessment of hedge effectiveness, and
the ineffective portions of these hedging instruments were approximately $1 million of gain for the year ended
December 31, 2011, and approximately $1 million of loss for both the years ended December 31, 2010 and 2009.
As of December 31, 2011, the amounts expected to be reclassified from AOCI into earnings over the next 12
months are approximately $75 million of net gains on foreign currency and cross currency swap contracts and
approximately $1 million of losses on forward interest rate contracts.
Fair value hedges
To achieve a desired mix of fixed and floating interest rates on our long-term debt, we have entered into
interest rate swap contracts, which qualify and have been designated as fair value hedges. The terms of these
interest rate swap contracts correspond to the related hedged debt instruments and effectively convert a fixed
interest rate coupon to a floating LIBOR-based coupon over the lives of the respective notes. The rates on these
swaps range from LIBOR plus 0.3% to LIBOR plus 2.6%. As of December 31, 2011, 2010 and 2009, we had
interest rate swap contracts with aggregate notional amounts of $3.6 billion, $3.6 billion and $1.5 billion,
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